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it is no more appropriate to conclude that this cost adjustment
"changes the amount excluded" than to say that section 162 or
section 263A "changes" the treatment of items under section 61.
Thus, if the premise of the Regulation is correct, there is no
conflict.
Petitioners' contention that there is a conflict depends
upon proof that the amount of gross income that may be excluded
is equal to the full "amount excluded" of section 458(b)(6). The
statute does not say so explicitly: it does not define the
"amount excluded" as the amount of gross income that a taxpayer
may elect not to include; what it provides is that the "amount
excluded" is the amount a taxpayer may elect not to include in
gross income. If petitioners are correct to assume that when the
statute speaks of items included in, and excluded from, gross
income, Congress intended to refer to amounts of "gross income"
within the meaning of section 1.61-3(a), Income Tax Regs., and
not merely amounts of gross receipts, this intention ought to be
discernible from the legislative history.
When one reviews the legislative history, not only is there
no evidence that Congress regarded the "amount excluded" as an
amount of gross income rather than gross receipts; one is struck
by the complete absence of any explicit reference to the cost
side of the relevant gross income computation. A few examples
will suffice to illustrate that Congress appears to have been
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